Insure

YES, LIFE INSURANCE can be a complex subject. To make it a little easier, fill out the life insurance needs worksheet on the next page and look at the following answers to frequently asked questions about life insurance.

Q: Does it make sense to have more than one life insurance policy?

A: Sure, usually to provide more for your beneficiaries.

Q: Do I need life insurance if I'm young, single and healthy?

A: One reason to buy it now is your premiums will be low and you can lock them in for a long time. But you're probably better off investing that money in a good mix of mutual funds now and waiting to buy life insurance until you marry or even until you have children.

Q: What happens if I can't pay a premium?

A: Many companies give you a grace period, typically 31 days, before your policy lapses. If you die within the grace period, the insurer subtracts your unpaid premium from the policy's death benefits.

Q: Are policies from direct-marketing companies any good?

A: That depends. You have to investigate the company as thoroughly as you do any other. But you can often save significantly on these policies because you don't have to pay an agent's commission.

Q: Can I buy any kind of life insurance without a medical exam?

A: The only coverage you can probably get is the group insurance plan your employer offers.

Q: How can I lower my premium?

A: Get healthier! Many companies will reduce your premiums if you quit smoking, for example, but you typically must be nicotine-free for at least a year. Other things you can do:1. Drop riders you no longer need.2. Lower your whole-life policy's face value.3. Convert your existing policy to a different kind, maybe term insurance with lower premiums.

Q: Can I name anyone I want as my beneficiary?

A: Most married people choose their spouse and/or their children. But you can name anyone else who has an "insurable interest" in your policy—usually that means some other relative or a person who's living with you.

Q: Can I change my beneficiaries any time I want?

A: Not necessarily. Some policies also prevent you from making changes. That's why you should also name "contingent beneficiaries", people you want the death benefits to go to in case your first beneficiaries die before you do.

Q: How can I keep my life insurance out of my estate?

A: One strategy is to put it into an irrevocable insurance trust. Consult a financial planner or a lawyer who specializes in estate planning.

Q: What are the main exclusions to look for in a policy?

A: The two most common reasons why a policy won't pay off are if the owner dies in a private airplane crash or dies while engaging in dangerous activities like skydiving. Read your policies carefully for other exclusions.

MONEY TIP

Sure, insurance policies are confusing and insurance agents don't always spell things out in clear, basic English. Shop for insurance as hard as you awould shop for a car or any other major puchase. Don't pay until everything -- including costs and discounts -- has been made clear to you in language you can understand.

BONUS TIP

How To Save On Any Kind Of Insurance

YOU DON'T WANT to pay full price for insurance. You want to buy the coverage you need at a discount. Ask every insurance company and agent you talk to about the discounts they offer that can cut your insurance bill. Here are some examples:

• Installing dead-bolt locks, smoke detectors and burglar alarms can usually bring discounts of 5% each off your homeowner's premium—as much as 15% or 20% if you install a sophisticated home-security system. There may be a discount if you're near a fire station.

• Having a teenage driver who gets good grades. In fact, good grades usually bring a bigger discount than just having your child take a driver's education course.

• Buying all your coverage from one company.

• Raising your deductible—the money you have to pay before your homeowner's or auto insurance kicks in. You have to decide how much you can afford to fork out if something bad happens. But usually, the higher your deductible, the lower your premiums will be.